ERMUSR MISC. ITEMS 02-10-2004 - Laserfiche WebLink

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L 1 �sNs,tq Mm.SES= - ^nUV4I 5!ILI F•-aiSOCl4IlOh 12805 Highway 55 • Suite 212 • F7lymouth. MN 55441-3859 • 763 551 1230 • 800422.0119(MN • Fax 763.551.0459 Federal Incentives for Renewables Two federal issues important to Minnesota municipal utilities should be addressed in any energy legislation passed by Congress: Tradable Tax Credit. Private developers receive a federal tax credit for electricity generated from certain renewable energy projects. The Renewable Energy Production Incentive (REPI) program is intended to provide a renewable incentive for public power systems, but it has been severely under-funded and ineffective. Legislation providing community-owned utilities a"tradable tax credit" for electricity produced by renewable sources would give them the ability to sell their tax credit (at less than face value) to private entities seeking a lower tax burden, and then use the proceeds to buy down the cost of the project. The tradable tax credit concept is an effective way to help diversify the nation's fuel reserves by promoting the increased production of efficient and clean energy resources. In addition, Minnesota law requires that municipal power agencies, G&T cooperatives and IOUs to make a "good faith effort" to generate or procure 1% of the electricity needs of the retail customers in their systems from "renewable" resources by 2005, and increase the amount by 1% each year, to 10%by 2015. An added biomass mandate is included, requiring 1/2% of electric sales to come from biomass sources by 2010, and 1%by 2015. Power from renewable resources and advanced technologies is usually more expensive than power from traditional generation sources. Federal investment incentives are needed to encourage the construction of these facilities. Private developers receive a federal tax credit for electricity generated from certain renewable energy projects. However, investment tax credits made available to privately-owned utilities and energy production companies do not create incentives for publicly-owned or rural electric cooperative utilities, which serve 25% of the nation's electricity load. Legislation providing a community-owned utility a"tradable tax credit" for electricity produced by renewable sources would give a consumer-owned electric utility the ability to receive a federal tax credit that would be comparable in amount to that made available to its private counterpart. The utility would be permitted to sell, transfer, assign or otherwise dispose of the credit to any taxpayer, including its customers. A consumer- owned utility could then offer the credits at a discount to encourage their purchase. A project receiving renewable energy production incentive (REPI) program funds or other federal grants would not be eligible for tradable tax credits. The tradable tax credit concept was dropped from the conference committee language for the 2003 energy bill at the last minute. This concept should be included in any legislation concerning renewable energy production or taxation at the earliest opportunity.